02 April 2008

Economics and development choices

By Sumita Kale“It is true that the economic man is dead, but his funeral rites still remain to be properly celebrated by his legitimate heir, the behaviouristic man, who has emerged from the laboratories of the psychologist but has not yet taken his rightful position in the centre of economics.” No, this is not a quote from a modern behavioural economist, it was written eighty years ago, in 1925. This post is a tribute to a man who got the essence of economics right – Prof. Radhakamal Mukherjee, considered a leading sociologist and environmentalist but forgotten by economists.
Reading Mukherjee is baffling, one wonders why the simple propositions were not taken seriously and were actually discarded, leaving economics to be a truly dismal discipline, bound in narrow confines by its graphs and equations. Thankfully some of his books are available online – Borderlands of Economics, Principles of Comparative Economics, Foundations of Indian Economics etc. Mukerjee’s take on economics is quite different from the way it is taught today- he blended it with geography, sociology and psychology, he brought in elements of biology and philosophy. This is an economics that makes a lot of sense. For instance, he divides the economic environment into three parts –
Ecologic - comprising the climate and topography, land resources, mineral and water resources, plants, animals and man’s inter-relationships with the physical environment as indirectly affecting economic life
Mechanical or technic - tools, weapons, capital and technology, systems of production, mechanisms of exchange, banking, instruments of credit etc. and
Institutional - State, social groups, law, tradition, standards of social values and ideologies, private property, custom or competition etc.
Economics should concern itself with all three, and not merely the second i.e. the price-cost economics. He went on to distinguish between laws, norms and ideals. The ecological environment is governed by laws, which have the same certainty as the laws in physical sciences. The mechanical or price and cost economics yields the norms of consistent action, an abstraction which can be justified only on the basis of statistical generalisations of past experiences or of a necessary law in ecological economics which produces it. The third gives rise to the ideals and policies of what men ought to do in concrete economic situations. He also brought in the aspect of time as being crucial since ‘laws, ‘norms’ and ‘ideals’ of economic activities are reached by a process extended over time. Without a clear understanding of these three categories, he said, economic analysis and prescription would be confused and divorced from reality. And this is actually what has happened, economics today is open to the charge of being an autistic discipline (check out the Post-Autistic Economics Network).
It was in the divide between the village and the city that Mukherjee lost the debate on the path to follow for development – most modern planners wanted India to grow through cities, the Western model, while he saw this model as one that would lead to a breakdown in social stability. He decried the idea that villages are the source of energy and labour and the cities, the hub of growth. Rather than let villages be subservient to cities, he wanted them to live a life of their own, be vibrant with skills and knowledge, he wanted to bring industry to villages, to let villages grow into cities. For him the solution lay in setting up cooperatives, not just for providing credit, as is popular, but also to give the necessary support for farm inputs, marketing the produce etc. Revitalising agriculture was one step, the next was to enable diversification of economic activity in the village, away from agriculture – this was the opposite of the migration model that pushed people to the cities. Some of Mukherjee’s prescriptions were anathema to modern thinking – he saw the caste system as a source of social cohesion in India society, for instance. But what we have seen now is that somewhere in the quest for industrialisation and growth, the balance has been lost. The rural-urban divide continues to grow, a direct fallout of an imperfect understanding of the socio-economic reality.
In 1916 Mukherjee wrote, “ How to bring life and progress to our villages is one of the most serious economic problems of the day.” Unfortunately, this remains a grave problem in the world today. Last year marked the milestone where the world became more urban than rural, but this is not quite an occasion to celebrate. To quote Prof.Wimberly, “So far, cities are getting whatever resource needs that can be had from rural areas. But given global rural impoverishment, the rural-urban question for the future is not just what rural people and places can do for the world’s new urban majority. Rather, what can the urban majority do for poor rural people and the resources upon which cities depend for existence? The sustainable future of the new urban world may well depend upon the answer.”
One can argue that a large part of the world’s current concerns on poverty, environment etc. could have been avoided if a more holistic view on development had been taken by economists and policy makers. Of course there will always be opponents to this view, but for them the counter argument would be : ‘unless you think outside your box, how would you know you are in the right box?”

6 comments:

Very interesting post Sumita, I did not know Mukherjee and will check his writings. His argument sounds like a forerunner of Lipton's "urban bias" - do you know if Lipton quotes him?

I am however somewhat skeptical of such arguments - is the opposition between rural and urban areas not a bit artificial? Can they be considered to be two different and opposing "classes"? TJ Byres has written a powerful critique of Lipton's argument which could be of interest to you - 1979. ‘Of Neo-Populist Pipe Dreams: Daedalus in the Third World and the Myth of Urban Bias’. Journal of Peasant Studies, 6 (2): 210–44.

Also - I will confess my ignorance on India, but can you tell us more on Mukherjee's notion that the caste system could be a source of "stability" in India? Is this not a shocking form of conservatism coming, I assume, from a member of a high caste who romanticises the life of poorer people?

Thanks Nicolas, will check out Lipton and Byres. I think Mukherjee's ideas on how to study economics got less attention than they deserved. On the village model, I definitely feel the balance has been lost even today. Its quite clear in the cities, which have become a magnet of labour with low quality of life. and the villages have remained out of the frame of development. As to the caste system, you may be right, but he was not distanced from the rural poor - his studies of the rural life are quite comprehensive. And though he wrote in the early 1900s, his views were opposed even then by others of the high castes. So I, personally, wouldnt give that too much attention.He was such a prolific writer on so many issues, I feel that he has been terribly neglected in economics. To pick and choose what we find relevant would be the lesson when we read authors from the past, rather than neglect them altogether, which is what is done today in the way we are taught. Especially when the issues they dealt with decades back still remain unresolved, it pays to go back and see different perspectives.Debate on these perspectives of course remains an imperative.

Did not know of Mukherjee's work till I read it on your post. Sounds fascinating. His emphasis on the village is similar to the one Mahatma Gandhi espoused. Wonder if Gandhi read Mukherjee... was he a well known author in India?

Gandhi saw the revival of the village as essential to the rebirth of India and I agree with him. See my post "Why is the World Such a Mess?" at undiplomatictimes.blogspot.com (You will have to scroll down a bit).

Thanks Bhaskar for the comment. Definitely the Gandhi philosophy was there. His 'personal' economist though was J C Kumarappa. Is Mukherjee well known in India? Not amongst the economists, but amongst sociologist, yes. Like I said, a pity to divide social sciences into this rigid disciplines as if economics has nothing to do with society.I think the problem was of extreme views, it became an either/or debate.. village vs modern industry, India wanted desperately to be on the growth path again so chose the latter. The balance was lost as only lip service was paid to Gandhi's views as if to "humour" his ideology.Your blog post mentions Community Corporation, Mukherjee saw cooperatives as the way forward. I would urge you to download his foundations of indian economics, and mail me when you have read it, would love to hear your views.

As I was grading for my summer course titled "urban economics", read your blog. I have not heard of Mukherjee before, thanks for introducing him. I feel very close to (your and) his ideas with some questions. I will definitely check his books!Thanks again.Economist may use some psychotheraphy!

In the US,Arthur O'Sullivan's book (application of mainstream microecon to urban issues) is the most popular one. For heterodox point of view, the challenge is what to do with the adjective "urban". Should it be an alternative history of thought class with lots of current statistics and case studies about urban issues? Our course book was David Clark's "Urban world/global City". Class group project was to link economic, social and environmental spheres with selected indicators given some definitions to link them (sustainability movement helps). Class participants got more interested in the topic as they discovered via indicators and case studies, how all are connected.We questioned and discussed many dichotomies in economics including urban-rural divide. I think, holistic economics ought to break oppositions and build linkages.Given your short introduction (knowing that I need to read his work), I find some contradiction in Mukherjee approach to rural-urban divide and seeing caste system as source of social cohesion. Doesn't such cohesion perpetuate the divide? I am somewhat aware of the differences b/w caste and class system but I can learn more.All the best!hande

Thanks Hande for your response. I really don’t know much about urban economics but I found Mukherjee very useful when I see the urban rural divide as I travel in India and think of development. As to the caste system, you are right, his totally idyllic description of caste and village cohesion jars when one is reading him. Its like “hey, this person was making so much sense and what happened now!” so he has been described as being quite “woolly” in his thinking. But like I said in a previous comment, it is for us to pick and choose what is relevant, important etc. I feel it’s common sense that the model of provision of basic services in villages that encourage economic activity is the way to go, rather than push people towards cities. His idea about the need for cooperatives in every sphere of procurement, marketing, finance etc. is very important to support economic activity. In fact, one of the banks in India has begun such complimentary services in rural areas as it realised that they cannot provide credit unless the basic supporting factors are in place. Sumita

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